Globalisation at Ge

CASE - 1
GLOBALIZATION AT GENERAL ELECTRIC
General Electric, the company that Thomas Edison founded, and now the largest industrial
conglomerate in America, produces a wide array of goods and services, from medical equipment,
power generators, jet engines, and home appliances, to financial services and even television
broadcasting (GE owns NBC, one of Americas big three network broadcasters). This giant
company with revenues of close to $180 billion is no stranger to international business. GE has
been operating and selling overseas for decades. During the tenure of legendary CEO Jack
Welch, GEs main goal was to be number 1 or 2 globally in every business in which it
participated. To further this goal, Welch sanctioned an aggressive and often opportunistic foreign
direct investment strategy. GE took advantage of economic weakness in Europe from 1989
to1995 to invest $17.5 billion in the region, half of which was used to acquire some 50
companies. When the Mexican peso collapsed in value in 1995, GE took advantage of the
economic uncertainty to purchase companies throughout in Latin America. And when Asian
slipped into a major economic crisis in 19971998 due to turmoil in the Asian currency markets,
Welch urged his managers to view it as a buying opportunity. In Japan alone, the company spent
$15 billion on acquisition in just six months. As a result, by the end of Welchs tenure in 2001,
GE earned over 40 percent of its revenues from international sales, up from 20 percent in 1985.
Welchs GE, however, was still very much an American company doing business abroad. Under
the leadership of his successor, Jeffery Immelt, GE seems to be intent on becoming a true global
company. For one thing, international revenues continue to grow faster than domestic revenues,
passing 50 percent of the total in 2007. This expansion is increasingly being powered by the
dynamic economies of Asia, particularly India and China. GE now sells more wide-bodied jet
engines to India than in the Untied States, and GE is a major beneficiary of the huge
infrastructure investments now taking place in China as that country invests rapidly in airports,
railways, and power stations. By 2012, analysts estimate that GE will be generating 55 to 60
percent of its business internationally.
To reflect the shifting center of gravity, Immelt has made some major changes in the way GE is
organized and operates. Until recently, all of GEs major businesses had head offices in the
United States and were tightly controlled from the center. Then in 2004, GE moved the head
office of its health carebusiness from the United States to London, the home of Amersham, a
company GE had just bought. Next,GE relocated the headquarters for the unit that sells
equipment to oil and gas companies to Florence, Italy.And in 2008, the company moved the
headquarters for GE Money to London. Moreover, it gave country managers more power.
Why is GE doing this? The company believes that to succeed internationally, it must be close to
its customers. Moving GE Money to London, for example, was prompted by a desire tobe closer
to customers in Europe and Asia. Executives at GE Health Care like London because it allows
easier flights to anywhere in the world. GE has also shifted research overseas.
Since 2004 it has opened R&D centers in Munich, Germany; Shanghai, China; and Bangalore,
India. The belief is that by locating in those economies where it is growing rapidly, GE can better
design equipment that is best suited to local needs. For example, GE Health Care makes MRI
scanners that cost $1.5 million each, but its Chinese research center is designing MRI scanners
that can be priced for $500,000 and are more likely to gain sales in the developing world.GE is
also rapidly internationalizing its senior management. Once viewed as a company that preferred
to hire managers from the Midwest because of their strong work ethic, foreign accents are now
frequently heard among the higher ranks. Country managers, who in the past were often
American expatriates, increasingly come from the regions in where they work. GE has found that
local nationals are invaluable when trying to sell to local companies and governments, where a
deep understanding of local language and culture is often critical. In China, for example, the
government is a large customer, and working closely with government bureaucrats requires a
cultural sensitivity that is difficult for outsiders to gain. In addition to the internationalization of
their management ranks, GEs American managers are increasingly traveling overseas for
management training and company events. In 2008, in a highly symbolic gesture, GE
Transportation, which is based in Erie, Pennsylvania, moved its annual sales meeting to Sorrento,
Italy from Florida. It was time that the Americans learnt to deal with jet lag, according to the
head of the unit.
Case Discussion Questions

1. Why do you think GE has invested so aggressively in foreign expansion? What opportunities
is it trying to exploit?
2. What is GE trying to achieve by moving some of the headquarters of its global businesses to
foreign locations? How might such moves benefit the company? Do these moves benefit the
United States?
3. What is the goal behind trying to internationalize the senior management ranks at GE? What
do you think it means to internationalize these ranks?
4. What does the GE example tell you about the nature of true global businesses?

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CASE - 1

GLOBALIZATION AT GENERAL ELECTRIC

Case Discussion Questions

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